Saxo Bank CFDs Reviewed

Located in Gentofte, just north of Copenhagen (in Denmark), Saxo Bank is one of the pioneering firms in the use of the Internet and web technologies for online trading in the capital markets with clients in more than 115 countries.

Saxo Bank provides a whole range of financial instruments, including Forex, futures, ETF’s, bonds and stocks, CFDs and spread bets. Even within the Contracts for Difference market, the range of products from Saxo Bank includes access to 25 exchanges around the world, and deals in more than 7000 CFDs.

The bank was founded in 1992, and is European-based with its headquarters in Copenhagen. The platform provided for most of the trading is called SaxoTrader, and this can be used when trading currencies, commodities, futures, options, stocks, and CFDs. In fact, Saxo Bank also licenses its services to other institutions, to which it gives a customized platform.

The CFD offerings were expanded in 2009 to include 20 different commodity contracts in energy, metals, and agricultural spheres. One reason for this flight to commodities was said to be the lack of confidence that traditional investors have in the share market. Trading commodities with CFDs is a much easier proposition than trading commodities directly, particularly because of the lot sizes in the commodity markets. The futures contract for crude oil is as much as 1000 barrels, but the CFD on the equivalent commodity is only 25 barrels.

Saxobank offers four different platform options – the browser-based SaxoWebtrader; Saxo Trader (requiring downloads); Saxo Mobiletrader (for those who want to trade via a mobile phone – an add on service for SaxoWebtrader and Saxo Trader customers) and the Saxo Minitrader for those new to trading. Saxo WebTrader and MobileTrader enable users to trade FX from any computer, laptop, mobile phone or personal digital assistant without the need to download additional software. MobileTrader is a built-in function of WebTrader, and is equipped with features including financial analysis, an advanced charting tool and dynamically calculated P/L, the spokesperson added.

The Saxo WebTrader requires no download or installation as it is a web-based platform and allows you to trade 50 + major forex currency crosses. WebTrader users can log in to their Saxo account and receive streaming prices. All major foreign exchange crosses can be traded on spreads from three pips (for EUR/USD, EUR/CHF, EUR/GBP, USD/JPY, for example). Note that the minimum deposit is USD 2,000.

In general, Saxo Bank does not charge commissions, but makes its money on the bid/ask spreads. Although it offers live pricing on the platform, much of its business is as a market maker. This means it can offer guaranteed stop loss orders for those who are nervous about large fluctuations in the market. However, if you want to do DMA trading, Saxo allow you to trade CFDs with direct market access major exchanges.

There are two ways CFD providers make their money, commissions or in the spread and Saxobank charges you via the spread. They usually charge about 2-3 pips on majors and about 10 points on CFDs. Saxo Bank are the “market maker” – they buy and resell the stock to you. Additionally with Saxo Bank there is a small fee of GBP 8 for trade sizes under the minimum threshold. [USD 10,000/USD 10 for US residents, EUR 10,000/EUR 12 for EURO countries]. The financing rates are slightly worse with Saxo Bank – long add 3%; short subtract 2.5%. And to be honest saxobank’s technical analysis sucks. Also, sometimes the orders aren’t executed due to “misfeeds,” but these on the whole were a minor problem although still something to keep in mind.

Saxobank offers online cfd trading with live prices and instant dealing. Limit and stop orders are also available including guaranteed stops. ‘Day Orders’ are available for intraday trading and ‘Good until Cancelled’ orders can be used for longer-term strategies.

SaxoBank also offer DMA CFDs but these are only reserved for frequent traders. If signing up with them do take this into consideration – in particular if you see that the orders for individual shares you are inputting into their system aren’t showing on your Level 2 screen then it probably means that they have set you up on their market maker platform. Again the fees can be an issue especially if you intend to trade USA shares via CFDs. The last time I checked they charged 2 cents per share for dealing in USA shares with financing set at +3pp (long)/-2.5pp (short).

One good thing is the ability to use stocks and bonds as collateral for speculative trading, which I imagine would appeal to people with a mix of long term views and short term. Also 160+ forex pairs is very impressive, despite the fact that the spreads are very variable around news and wide for the rest of the time. They also offer trailing stops and have a very good analyst team and provide you access to UBS, BARCAP and Commonwealth bank of Australia FX analysis for free which is a good perk. Your funds aren’t segregated either but if you hold less than 40,000 euros then you are protects by the Danish FSA..

An interesting feature from Saxo Bank is the TradeMaker real time idea generator. This is available on all platforms, and suggests trading ideas for index and commodity CFDs, giving entry, target, and stoploss levels. It also shows you why it is suggesting the idea, and how you should manage the trade. When a new idea is offered, a signal goes off on the trading platform, and you can see the details with a single click.

The margin requirement for trading CFDs is 5%, which is a typical amount of leverage, and shows the great advantage that CFD trading has over traditional stock trading. Saxo Bank claims to have small spreads, and the small lot sizes mean that with a modest amount of money you can diversify your exposure.

Saxobank is regulated by the Danish Financial Services Authority (FSA). In addition, because they are a bank, up to 40,000 EUR of you cash with them is insured!

Overall, reports about CFD trading with Saxo Bank using their proprietary interfaces, called SaxoWeb Trader (the browser based platform), SaxoTrader, and SaxoMobile Trader, have been favourable. It has maintained a good reputation, is a well-established company which is European based and provides the tools needed to trade efficiently and effectively. In short – quite expensive compared to competition but nice platform and range of fx pairs.